From one large cargo ship, stevedores unload 50kg bags of Vietnamese rice. At another, clouds of dust rise as grain is offloaded into a truck, while nearby a ferry waits to transport Iraqi passengers down the Gulf to Bahrain or Dubai.

Umm Qasr, Iraq’s only deepwater port, is bustling with activity. A large proportion of the country’s imports pass through its docks but, as a critical artery for the nation, it offers a glimpse into the state of Iraq’s faltering economy after years of sanctions and war. While imports flow in, there are no goods going in the opposite direction; many of its outdated cranes do not work; and it is far behind the rest of the world in terms of the size of vessels it can accommodate.

“It’s a flashback to 25 years ago,” says Tom Quaye, a Royal Navy officer involved in the port’s rehabilitation. “A massive amount of work still needs to be done.”

But progress is slowly being made. A year ago the port on the southern tip of the nation was run by militias who would intimidate dockworkers to slow the pace of their work so ships would stay at the port for longer than necessary, all the time paying fees.

“Every day I was called [and told] ‘you will be killed’,” says a senior Iraqi port official. “Corruption was everywhere in the Iraqi government facilities.”

The official, who is still nervous and does not want to be named, left his job and returned only after an Iraqi-led security operation last March removed the militias.

Traffic has steadily increased at the port, as has the quality of goods – battered secondhand cars are being joined by new four-wheel drive vehicles and lines of Mann trucks and Mercedes tankers, ready to be driven north into Iraq’s heartland.

To some, this is a sign of improving confidence in Basra province – home to Iraq’s five ports – and beyond as security gains made over the past year mean people have been able to start turning their thoughts to development rather than day-to-day survival.

Ensuring development takes place will be critical to sustaining the gains, as militias have been able to draw support from poor, unemployed men.

“It all depends on how economic reconstruction goes,” says a western diplomat. “If you are able to deliver and continue improving the standard of living and increasing the number of jobs, you will suck away whatever air [the Mahdi Army, the militia that controlled the port] will need to resurface.”

There are many barriers ahead. In spite of Basra’s riches – it is home to 70 per cent of Iraq’s proven oil reserves – unemployment is high and the infrastructure dilapidated. In Umm Qasr town, electricity runs for three hours on, three hours off and homes lack running water and an effective sewage system.

Many hope last month’s provincial elections, the most open and hotly contested since the US-led invasion, will trigger further improvements. But some question how much better the next administration will be in terms of ability and experience.

“I think they will be better,but how much better remains to be seen,” says the diplomat.

In Basra, the provincial council had a budget of $300m (€238m, £211m) in 2008 but has only been able to spend 46 per cent of it because of a combination of over-burdensome bureaucracy and a lack of skills and experience, say British officials.

Business people, meanwhile, complain about rampant corruption and patronage – ailments that afflict the entire country.

“It’s very difficult [to do business] if you don’t have connections with people in the right places,” says Alaa, a Baghdadi businessman visiting Basra. “If you have a bank account [to pay bribes] you can do anything, even if your work is not very good.” While much blame has been heaped on local officials, western experts say the central government in Baghdad has also hindered investment and reconstruction in the province.

There has been foreign interest in managing Umm Qasr port, including from Dubai’s DP World, but the transport ministry has only offered three-year contracts to run container berths.

Foreign companies have also expressed interest in ventures with state-owned enterprises in Basra, including steel and petrochemical plants. These factories should be key providers of jobs and economic activity but suffer from obsolete machinery and a lack of spare parts and skilled workers. Government sluggishness and bureaucracy are blamed for slow responses to the investment proposals.

There is a “reticence to sign away the crown jewels”, says one British official.